How to successfully raise international capital? (In-depth guide)

An excellent business operating in a market that is too small will still struggle to deliver attractive returns for investors. Therefore, before considering the product or revenue, investment funds usually assess market potential.

According to the CB Insights43% of startups fail due to a lack of market demand (poor product-market fit), making it the most common cause of failure.

43% of startups fail because they lack market demand.

Investors often ask questions such as:

• Is the target market large enough?
• How much is this industry growing each year?
• Can the business expand into regional or international markets?
• What will market trends be like in the next 5–10 years?
• Do the company's products meet market demand?

Investors also need to pay special attention to the level of market acceptance of the product (Market Traction).

A product is considered to have potential when the number of users or customers grows steadily over a short period of time.

For example, the user rate increased by approximately 10% per week, maintained consistently for 4–5 weeks. This is a positive sign, indicating that the product is gradually achieving Product-Market Fit and has the potential for future expansion. At the same time, it's an impressive indicator that convinces investors to invest in the company.

Investors don't buy current results, they buy... future growth potentialThey want to know if the business can increase revenue many times over without increasing costs at a corresponding rate.

A scalable business model typically possesses the following characteristics:

• Revenue has grown steadily year after year.
• Profitability improves as scale increases.
• It is possible to expand into multiple markets without having to rebuild the entire system.
• The cost of maintaining the company's sustainability until it recoups its investment or reaches the next funding round (Important).

For many venture capital funds, the amount of money they want to raise is less important than what milestones that money will help the company achieve in the next 12–18 months.

For example, two startups are both seeking $1 million in funding. Startup A only states that the capital will be used for "expanding operations".

Meanwhile, Startup B clearly outlined its plan to use the capital to sustain an 18-month runway, expand its product development team, achieve a $2 million ARR (Annual Recurring Revenue) and increase its number of paying customers fivefold before its Series A funding round.

Clearly, Startup B will inspire greater confidence because investors can see a concrete growth roadmap, measurable goals, and the ability to use capital efficiently, rather than just seeing the need to raise funds.

Ideas may change, but the leadership team is the deciding factor in whether a business can adapt and grow.

First Round CapitalThe venture capital firm, which has invested in brands like Notion/Roblox, clearly states its investment criteria: the competence of the company's leadership team.

First Round Capital shares the common traits of outstanding founders.

This is one of the major barriers that many SMEs face when Establishing a foreign-owned company in Vietnam Unable to raise international capital.

According to the PwC Global Investor Survey94% of investors said they value the quality and reliability of company information when making investment decisions.

The PwC Global Investor Survey 2023 on factors influencing investment decisions.

Investors look not only at revenue but also want to understand the overall financial health of a business, including:

• The financial reports are complete and accurate.
• Stable cash flow.
• Tax obligations have been fulfilled in accordance with regulations.
• The accounting system is transparent.
• The ability to audit and retrieve data when needed.
• The ability to maintain sustainability

If a business cannot account for its financial data or has many opaque transactions, the due diligence process for investment (through a certified auditing firm) can halt fundraising even if the business is experiencing strong growth.

International investors assess not only the potential for profit but also the level of risk involved in an investment.

According to the PwC Global Investor Survey 2023, more than 70% of investors believe that governance and sustainability factors have a direct impact on the long-term value of a business.

The sustainability of a company is a key factor in an investor's decision.

Before investing, they usually check:

• The legal structure of the business.
• Is the ownership of the shares clearly defined?
• Status of trademark, patent, and intellectual property registrations.
• Job Comply with tax regulations, AML/KYC and related regulations.
• Corporate governance and risk management policies.
• Comply with ESG and sustainability regulations..

Many businesses believe that successful fundraising depends on a well-designed pitch deck or the ability to present effectively to investors.

However, the reality is that most deals fail before reaching the negotiation stage because the businesses are not ready in terms of legal structure, finance, governance, and growth strategy.

According to the Harvard Business Review In the topic of Engaging with Your Investors, investors are not just investing in an idea; they are investing in a business that has the potential for growth, is well-managed, and is well-equipped to scale.

Similarly, Y Combinator, A guide to seed fundraising It was also emphasized that startups should only raise capital when they can tell a compelling story based on data, demonstrate growth, and have a credible business structure to secure funding.

Advice from Y Combinator, a well-known American venture capital fund.

Besides meeting criteria such as business model, founding team capabilities, growth rate, and expansion potential, there is one crucial factor that is often underestimated by businesses: the corporate structure.

In fact, many international investment funds not only assess whether a business is worth investing in, but also consider whether Can they invest in that business in a way that is favorable, transparent, and legally secure?

That is why the majority of startups and high-growth businesses in Southeast Asia choose to establish their parent companies in international financial centers such as Singapore or Hong Kong to raise capital, while the operating company continues to operate in the host country.

This model makes it easier for investors to execute investment transactions, manage share ownership, implement ESOPs, conduct subsequent funding rounds, and prepare for future IPOs or M&A plans.

To help founders better understand these two financial centers, GLA experts have prepared the following data table:

The success of a fundraising deal depends not only on the quality of the business but also on the level of compatibility between the business and the investor (Investor-Founder Fit).

In fact, every investment fund develops an Investment Thesis – a set of principles regarding the industry, investment period, size, geographic area, and level of risk they are willing to invest in.

This means that a seed-stage AI startup might be highly valued by one fund, but not suitable for another fund that only invests in growth-stage businesses.

Similarly, a traditional manufacturing business would likely not attract attention from funds specializing in SaaS or DeepTech.

Therefore, before preparing a pitch deck or scheduling investor meetings, businesses need to answer one crucial question: Which investor is truly the right fit for my business?

First Round Capital's investment trends

SEEDS Capital is an investment platform under SG Growth Capital, operated by Enterprise Singapore (EnterpriseSG) and the Singapore Economic Development Board (EDB).

SEEDS Capital focuses on supporting early-stage technology startups in Singapore with the potential to expand internationally through a co-investment model with Venture Capital funds and private investors.

There are many different forms of international fundraising, depending on the stage of development, business model, and goals of the enterprise. Common forms include:

• Equity Financing: Investors contribute capital in exchange for a stake in the business. This is the most common form of investment for startups and growth businesses, often used in pre-seed, seed, Series A, and subsequent funding rounds.
• Debt Financing: Businesses raise capital through loans from banks, financial institutions, or investment funds without sharing ownership. This form of financing is suitable for businesses that already have stable cash flow and the ability to repay debt.
• Convertible Note and SAFE: These are common funding tools for early-stage startups. Investors provide capital upfront, and the investment can be converted into equity in subsequent funding rounds under agreed-upon terms.
• Revenue-Based Financing: The business receives capital and repays the investor with a percentage of revenue until the contractual obligations are fulfilled. This model is suitable for businesses with recurring revenue but which do not want to dilute their shareholding.
• Strategic Investment: Funding comes from large corporations or businesses with the goal of establishing partnerships, expanding markets, accessing technology, or developing value chains.
• Government funding and innovation funds (Grant & Government Funding): Businesses can access support programs from the government, international organizations, or innovation funds for areas such as technology, research and development (R&D), digital transformation, or sustainable development.

Founders who are able to successfully raise capital typically possess three key qualities:

• The ability to choose the right opportunity.
• Exceptional ability in a specific field
• Deep understanding of the market, customers, and products.

Investors are not just looking for people with good ideas; they want to invest in founders who have a clear vision, the ability to see big opportunities, solve complex problems, and the commitment to turn their ideas into sustainable, growing businesses.